69 FR 45676, July 30, 2004
DEPARTMENT OF COMMERCE
International Trade Administration
[C-475-819]
Certain Pasta from Italy: Preliminary Results and Partial Rescission
of the Seventh Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results and partial rescission of
countervailing duty administrative review.
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SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on certain pasta from Italy for
the period of January 1, 2002 through December 31, 2002. We
preliminarily find that certain producers/exporters under review
received countervailable subsidies during the period of review. If the
final results remain the same as these preliminary results, we will
instruct U.S. Customs and Border Protection to assess countervailing
duties as detailed in the ``Preliminary Results of Review'' section of
this notice.
We are also rescinding the review for Pastificio Antonio Pallante
S.r.1. in accordance with 19 CFR 351.213(d)(3).
Interested parties are invited to comment on these preliminary
results (see the ``Public Comment'' section of this notice).
DATES: Effective Date: August 30, 2004.
FOR FURTHER INFORMATION CONTACT: Melani Miller, Andrew Smith, or Nathan
Halat, Office of Antidumping/Countervailing Duty Enforcement, Group 1,
Import Administration, U.S. Department of Commerce, Room 3099, 14th
Street and Constitution Avenue, NW., Washington, DC 20230; telephone
(202) 482-0116, (202) 482-1276, and (202) 482-5256, respectively.
SUPPLEMENTARY INFORMATION:
Case History
On July 24, 1996, the Department of Commerce (``the Department'')
published a countervailing duty order on certain pasta (``pasta'' or
``subject merchandise'') from Italy. See Notice of Countervailing Duty
Order and Amended Final Affirmative Countervailing Duty Determination:
Certain Pasta From Italy, 61 FR 38544 (July 24, 1996). On July 2, 2003,
the Department published a notice of ``Opportunity to Request
Administrative Review'' of this countervailing duty order for calendar
year 2002. See Antidumping or Countervailing Duty Order, Finding, or
Suspended Investigation; Opportunity to Request Administrative Review,
68 FR 39511 (July 2, 2003). On July 31, 2003, we received requests for
review from the following six producers/exporters of Italian pasta:
Pastificio Fratelli Pagani S.p.A. (``Pagani''), Pastificio Antonio
Pallante S.r.l. (``Pallante''), Pastificio Corticella S.p.A.
(``Corticella'')/Pastificio Combattenti S.p.A. (``Combattenti'')
(collectively, ``Corticella/Combattenti''), Pasta Zara S.p.A. (``Pasta
Zara'')/Pasta Zara 2 S.p.A. (``Pasta Zara 2'') \1\ (collectively
``Pasta Zara/Pasta Zara2''), Pasta Lensi S.r.l. (``Lensi''),\2\ and
Pastificio Carmine Russo S.p.A. (``Russo'')/Pastificio Di Nola S.p.A.
(``Di Nola'') (collectively, ``Russo/Di Nola''). In accordance with 19
CFR 351.221(c)(1)(i), we published a notice of initiation of the review
on August 22, 2003. See Initiation of Antidumping and Countervailing
Duty Administrative Reviews and Request for Revocation in Part, 68 FR
50750 (August 22, 2003).
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\1\ During the first part of the period of review (calendar year
2002) (``POR''), Pasta Zara 2 was named Societa per Azioni Pasta
Giulia S.p.A.; on September 9, 2002, the company changed its name to
Pasta Zara 2.
\2\ Lensi is the successor in interest to IAPC Italia S.r.l. See
Notice of Final Results of Antidumping and Countervailing Duty
Changed Circumstances Reviews: Certain Pasta from Italy, 68 FR 41553
(July 14, 2003).
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On October 21, 2003 and December 1, 2003, we issued countervailing
duty questionnaires to the Commission of the European Union (``EC''),
the Government of Italy (``GOI''), Pagani, Pallante, Corticella/
Combattenti, Pasts Zara/Pasta Zara 2, Lensi, and Russo/Di Nola. We
received responses to our questionnaires in November and December 2003
and January 2004. We issued supplemental questionnaires to the
respondents in January, February, March, May, and June 2004, and
received responses to our supplemental questionnaires in February,
March, May, and June 2004.
On October 23, 2003, Pallante withdrew its request for review. As
discussed in the ``Partial Rescission'' section, below, we are
rescinding this administrative review for Pallante.
On March 17, 2004, we published a notice extending the time limit
for the preliminary results until July 30, 2004. See Certain Pasta from
Italy: Notice of Extension of Time Limit for Preliminary Results of
Countervailing Duty Administrative Review, 69 FR 12642 (March 17,
2004).
Partial Rescission
The Department's regulations at 19 CFR 351.213(d)(1) provide that
the Department will rescind an administrative review, in whole or in
part, if a party that requested a review withdraws the request within
90 days of the date of publication of the notice of initiation of the
requested review. Pallante withdrew its request for an administrative
review on October 23, 2003, which is within the 90-day deadline. No
other party requested a review of Pallante's sales. Therefore, because
this withdrawal request was timely filed, we are rescinding this review
with respect to Pallante in accordance with 19 CFR 351.213(d)(1). We
will instruct U.S. Customs and
[[Page 45677]]
Border Protection (``Customs'') to liquidate any entries from Pallante
during the POR and to assess countervasiling duties at the rate that
was applied at the time of entry.
Scope of the Review
Imports covered by this review are shipments of certain non-egg dry
pasta in packages of five pounds (2.27 kilograms) or less, whether or
not enriched or fortified or containing milk or other optional
ingredients such as chopped vegetables, vegetable purees, milk, gluten,
diastases, vitamins, coloring and flavorings, and up to two percent egg
white. The pasta covered by this scope is typically sold in the retail
market, in fiberboard or cardboard cartons, or polyethylene or
polypropylene bats of varying dimensions.
Excluded from the scope of this review are refrigerated, frozen, or
canned pastas, as well as all forms of egg pasta, with the exception of
non-egg dry pasta containing up to two percent egg white. Also excluded
are imports of organic pasta from Italy that are accompanied by the
appropriate certificate issued by the Instituto Mediterraneo Di
Certificazione, Bioagricoop S.r.l., QC&I International Services,
Ecocert Italia, Consorzio per il Controllo dei Prodotti Biologici,
Associazione Italiana per l'Agricoltura Biologica, or Codex S.r.L.
The merchandise subject to review is currently classifiable under
item 1902.19.20 of the Harmonized Tariff Schedule of the United States
(``HTSUS''). Although the HTSUS subheading is provided for convenience
and customs purposes, the written description of the merchandise
subject to the order is dispositive.
Scope Rulings
The Department has issued the following scope rulings to date:
(1) On August 25, 1997, the Department issued a scope ruling that
multicolored pasta, imported in kitchen display bottles of decorative
glass that are sealed with cork or paraffin and bound with raffia, is
excluded from the scope of the antidumping and countervailing duty
orders. See Memorandum from Edward Easton to Richard Moreland, dated
August 25, 1997, which is on file in the Department's Central Records
Unit (``CRU'') in Room B-099 of the main Department building.
(2) On July 30, 1998, the Department issued a scope ruling, finding
that multipacks consisting of six one-pound packages of pasta that are
shrink-wrapped into a single package are within the scope of the
antidumping and countervailing duty orders. See Letter from Susan H.
Kuhbach to Barbara P. Sidari, dated July 30, 1998, which is available
in the CRU.
(3) On October 23, 1997, the petitioners filed an application
requesting that the Department initiate an anti-circumvention
investigation of Barilla S.r.L. (``Barilla''), an Italian producer and
exporter of pasta. The Department initiated the investigation on
December 8, 1997. See Initiation of Anti-Circumvention Inquiry on
Antidumping Duty Order on Certain Pasta From Italy, 62 FR 65673
(December 15, 1997). On October 5, 1998, the Department issued its
final determination that, pursuant to section 781(a) of the Tariff Act
of 1930, as amended by the Uruguay Round Agreements Act (``URAA'')
effective January 1, 1995 (``the Act''), circumvention of the
antidumping order on pasta from Italy was occurring by reason of
exports of bulk pasta from Italy produced by Barilla which subsequently
were repackaged in the United States into packages of five pounds or
less for sale in the United States. See Anti-Circumvention Inquiry of
the Antidumping Duty Order on Certain Pasta from Italy: Affirmative
Final Determination of Circumvention of the Antidumping Duty Order, 63
FR 54672 (October 13, 1998).
(4) On October 26, 1998, the Department self-initiated a scope
inquiry to determine whether a package weighing over five pounds as a
result of allowable industry tolerances is within the scope of the
antidumping and countervailing duty orders. On May 24, 1999, we issued
a final scope ruling finding that, effective October 26, 1998, pasta in
packages weighing or labeled up to (and including) five pounds four
ounces is within the scope of the antidumping and countervailing duty
orders. See Memorandum from John Brinkmann to Richard Moreland, dated
May 24, 1999, which is available in the CRU.
(5) On April 27, 2000, the Department self-initiated an anti-
circumvention inquiry to determine whether Pagani's importation of
pasta in bulk and subsequent repackaging in the United States into
packages of five pounds or less constitutes circumvention with respect
to the antidumping and countervailing duty orders on pasta from Italy
pursuant to section 781(a) of the Act and 19 CFR 351.225(b). See
Certain Pasta from Italy: Notice of Initiation of Anti-circumvention
Inquiry of the Antidumping and Countervailing Duty Orders, 65 FR 26179
(May 5, 2000). On September 19, 2003, we published an affirmative
finding of the anti-circumvention inquiry. See Anti-Circumvention
Inquiry of the Antidumping and Countervailing Duty Orders on Certain
Pasta from Italy: Affirmative Final Determinations of Circumvention of
Antidumping and Countervailing Duty Orders, 68 FR 54888 (September 19,
2003).
Period of Review
The period for which we are measuring subsidies is January 1, 2002
through December 31, 2002.
Changes in Ownership
Effective June 30, 2003, the Department adopted a new methodology
for analyzing privatizations in the countervailing duty context. See
Notice of Final Modification of Agency Practice Under Section 123 of
the Uruguay Round Agreements Act, 68 FR 37125 (June 23, 2003)
(``Modification Notice'').\3\ The Department's new methodology is based
on a rebuttable ``baseline'' presumption that non-recurring, allocable
subsidies continue to benefit the subsidy recipient throughout the
allocation period (which normally corresponds to the average useful
life (``AUL'') of the recipient's assets). However, an interested party
may rebut this baseline presumption by demonstrating that, during the
allocation period, a change in ownership occurred in which the former
owner sold all or substantially all of a company or its assets,
retaining no control of the company or its assets, and that the sale
was an arm's-length transaction for fair market value.
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\3\ The Modification Notice explicitly addresses full
privatizations, but notes that the Department would not make a
decision at that time as to whether the new methodology would also
be applied to other types of ownership changes and factual
scenarios, such as partial privatizations or private-to-private
sales. See 68 FR at 37136. We have now determined to apply the new
methodology to full, private-to-private sales of a company (or its
assets) as well. Among other reasons, we note that our prior ``same
person'' methodology used for analyzing changes in ownership such as
private-to-private sales has been found unlawful by the Court of
Appeals for the Federal Circuit in Allegheny Ludlum Corp. v. United
States, 367 F.3d 1339 (Fed. Cir. 2004).
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In considering whether the evidence presented demonstrates that the
transaction was conducted at arm's length, we will be guided by the
definition of an arm's-length transaction included in the Statement of
Administrative Action accompanying the URAA, H.R. Doc. No. 103-316
(1994), which defines an arm's-length transaction as a transaction
negotiated between unrelated parties, each acting in its own interest,
or between related parties such that the terms of the
[[Page 45678]]
transaction are those that would exist if the transaction had been
negotiated between unrelated parties. Id. at 928.
In analyzing whether the transaction was for fair market value, the
basic question is whether the full amount that the company or its
assets (including the value of any subsidy benefits) were actually
worth under the prevailing market conditions was paid, and paid through
monetary or equivalent compensation. In making this determination, the
Department will normally examine whether the seller acted in a manner
consistent with the normal sales practices of private, commercial
sellers in that country. Where an arm's-length sale occurs between
purely private parties, we would normally expect the private seller to
act in a manner consistent with the normal sales practices of private,
commercial sellers in that country. With regard to a government-to-
private transaction, however, where we cannot make that same
assumption, a primary consideration in this regard normally will be
whether the government failed to maximize its return on what it sold,
indicating that the purchaser paid less for the company or assets than
it otherwise would have had the government acted in a manner consistent
with the normal sales practices of private, commercial sellers in that
country.
If we determine that the evidence presented does not demonstrate
that the change in ownership was at arm's length for fair market value,
the baseline presumption will not be rebutted and we will find that the
unamortized amount of any pre-sale subsidy benefit continues to be
countervailable. Otherwise, if it is demonstrated that the change in
ownership was at arm's length for fair market value, any pre-sale
subsidies will be presumed to be extinguished in their entirety and,
therefore, non-countervailable.
A party can, however, obviate this presumption of extinguishment by
demonstrating that, at the time of the change in ownership, the broader
market conditions necessary for the transaction price to reflect fairly
and accurately the subsidy benefit were not present, or were severely
distorted by government action (or, where appropriate, inaction). In
other words, even if we find that the sales price was at ``market
value,'' parties can demonstrate that the broader market conditions
were severely distorted by the government and that the transaction
price was meaningfully different from what it would otherwise have been
absent the distortive government action.
Where a party demonstrates that these broader market conditions
were severely distorted by government action and that the transaction
price was meaningfully different from what it would otherwise have been
absent the distortive government action, the baseline presumption will
not be rebutted and the unamortized amount of any non-recurring pre-
sale subsidy benefit will continue to be countervailable. Where a party
does not make such a demonstration with regard to an arm's-length sale
for fair market value, we will find all non-recurring pre-sale
subsidies to be extinguished by the sale and, therefore, to be non-
countervailable.
In the instant proceeding, Russo/Di Nola, Corticella/Combattenti,
and Pasta Zara/Pasta Zara 2 underwent changes in ownership during the
applicable period. Neither Corticella/Combattenti nor Pasta Zara/Pasta
Zara 2 challenged the Department's baseline presumption that non-
recurring subsidies continue to benefit the recipient over the
allocation period. Thus, we preliminarily find for these respondents
that any unallocated benefits from non-recurring subsidies received
prior to their changes in ownership continue to be countervailable.
Regarding Russo/Di Nola, Di Nola was a family-owned and operated
company until 1998, when it was purchased by another company (whose
name is proprietary). In December 2001, Carmine Russo S.p.A. di
Cicciano (``Cicciano''), which also had been a family-owned and -
operated business, was purchased by Di Nola. At the time of the sale,
Cicciano ceased to exist and the newly acquired company was legally
reconstituted as Russo. In 2003, after the POR in this proceeding, the
shares of Di Nola were fully absorbed into Russo and the two companies
became a single corporate entity.
With regard to the Di Nola change in ownership in 1998, Russo/Di
Nola reports that Di Nola did not receive any non-recurring subsidies
prior to its purchase in 1998. Thus, we preliminarily find that we need
not perform a change-in-ownership analysis for this transaction because
Di Nola did not receive any subsidies prior to this change in
ownership.
As for the Cicciano change in ownership, Russo/Di Nola reports that
benefits under three programs were received by Cicciano prior to the
change in ownership in 2001: Industrial Development Grants Under Law
488/92, Industrial Development Grants Under Law 64/86, and European
Regional Development Fund (``ERDF'') Grants. According to Russo/Di
Nola, the subsidies received by Cicciano were extinguished by the
openly-negotiated, arm's-length sale of most of Cicciano's shares and
all of its assets and, thus, none of these benefits are countervailable
with respect to Russo/Di Nola under the Department's new change-in-
ownership methodology.
As noted above, the first step in our new change-in-ownership
methodology is to determine whether the former owner sold all or
substantially all of a company or its assets, retaining no control of
the company or its assets. Based on record information, almost all of
the outstanding shares of Cicciano were sold to Di Nola, and most of
the former shareholders divested themselves of all ownership and
operational control of the company (the exact numbers are proprietary).
As noted above, Cicciano's name was formally changed to Russo and the
company was legally registered with the appropriate authorities as a
new entity. Thus, based on the information on the record, we
preliminarily find that the former owner sold all or substantially all
of Cicciano and its assets, retaining no control of the company or its
assets.
Thus, we next examined whether the sale was an arm's-length
transaction for fair market value. According to record information, the
transaction was negotiated between unrelated, privately-owned parties.
There is no record evidence of any pre-existing relationship or
affiliation between Cicciano and Di Nola or any company in Di Nola's
corporate group of companies. According to the share purchase
agreement, the shares were valued by external independent auditors. An
internal feasibility analysis and market study, as well as an external
independent asset valuation study and a due diligence analysis, were
also conducted of Cicciano by the purchasing entity to determine the
company's financial status, brand strength, marketability, and asset
value. After negotiations, the parties agreed to an all-cash share
purchase in which almost all of the shares of Cicciano were purchased
by Di Nola.
Based on the above information, we preliminarily find that the sale
of Cicciano was an arm's-length transaction negotiated between
unrelated parties, each acting in its own interest. As noted above,
where an arm's-length sale occurs between purely parties, we would
normally expect the private seller to act in a manner consistent with
the normal sales practices of private, commercial sellers in that
country. Because this transaction occurred between purely private
parties, we also preliminarily find that this translation was conducted
for fair
[[Page 45679]]
market value. Consequently, we preliminarily determine that any
subsidies received by Cicciano prior to its change in ownership; are
presumed to be extinguished in their entirety and, therefore, non-
countervailable.
Subsidies Valuation Information
Allocation Period
Pursuant to 19 CFR 351.524(b), non-recurring subsidies are
allocated over a period corresponding to the AUL of the renewable
physical assets used to produce the subject merchandise. Section
351.524(d)(2) of the Department's regulations creates a rebuttable
presumption that the AUL will be taken from the U.S. Internal Revenue
Service's 1977 Class Life Asset Depreciation Range System (``IRS
Tables''). For pasta, the IRS Tables prescribe an AUL of 12 years. None
of the responding companies or interested parties disputed this
allocation period. Therefore, we have used the 12-year allocation
period for all respondents.
Attribution of Subsidies
The Department's regulations at 19 CFR 351.525(b)(6) direct that
the Department will attribute subsidies received by certain affiliated
companies to the combined sales of those companies. Based on our review
of the responses, we find that ``cross-ownership'' exists with respect
to certain companies, as described below, and we have attributed
subsidies accordingly.
Lensi: Lensi has no affiliated companies located in Italy and has,
therefore, responded only on its own behalf.
Russo/Di Nola: Russo has responded on behalf of itself and Di Nola,
both of whom manufacture the subject merchandise in the same group of
companies. We preliminarily find that cross-ownership exists between
Russo and Di Nola in accordance with 19 CFR 351.525(b)(6)(i) and (ii)
are, thus, attributing any subsidies received by Russo and Di Nola to
the combined sales of both companies.
Corticella/Combattenti: Corticella and Combattenti are both
producers of subject merchandise and are owned by the same holding
company, Euricom S.p.A. (``Euricom''), and companies in the Euricom
group, Euricom group companies own 100 percent of Combattenti and 70
percent of Corticella. Other Euricom group companies are also involved
in the production and distribution of subject merchandise.
Specifically, one group company (whose name is proprietary), receives a
commission on some of Corticella's home market sales. Also, Euricom
group company Molini Certosa S.p.A. (``Certosa'') mills durum and non-
durum wheat, some of which is an input for subject merchandise produced
by Corticella and Combattenti. Additionally, Cooperative Lomellina
Cerealicoltori (``CLC'') provides conversion services for both
Combattenti and Corticella. CLC is not part of the Euricom group and
Euricom is not a member of CLC, but a relative of Euricom's majority
shareholder is a CLC cooperative member.
We preliminarily determine that cross-ownership does not exist with
regard to CLC consistent with 19 CFR 351.525(b)(6)(vi). Therefore, we
are not including subsidies received by CLC or CLC's sales in our
subsidy calculations. With regard to the euricom group company that
receives a commission on some of Corticella's home market sales,
although cross-ownership may exist, the company does not meet any of
the criteria stipulated in 19 CFR 351.525(b)(6)(ii) through (iv).
Moreover, because Corticella/Combattenti has reported that this company
acts as a selling agent only on Corticella's home market sales and not
on its exports, 19 CFR 351.525(c) does not apply. Thus, we are also not
including subsidies received by this company or this company's sales in
our subsidy calculations.
With regard to Corticella and Combattenti, we preliminarily find
that they each meet the criteria stipulated in 19 CFR
351.525(b)(6)(ii). As for Certosa, Corticella/Combattenti has argued
that it does not have to report on behalf of Certosa because Certosa
does not meet any of the criteria listed in 19 CFR 351.525(b)(6),
including 19 CFR 351.525(b)(6)(iv). Specifically, citing to the Notice
of Final Affirmative Countervailing Duty Determination: Polyethylene
Terephthalate Film, Sheet, and Strip (PET Film) from India, 67 FR 34905
(May 16, 2002) and the accompanying Issues and Decision memorandum at
comment 15 (``Pet Film from India''), Corticella/Combattenti argues
that, because Certosa's production is not ``dedicated almost
exclusively'' to semolina (the input product for pasta) because it also
mills soft wheat, 19 CFR 351.525(b)(6)(iv) does not apply. (Pagani
makes an identical argument with regard to its affiliated durum and
soft wheat milling operation, Molina di Rovato S.p.A. (``Rovato'').)
We disagree with Corticalla/Combattenti and Pagani's interpretation
of PET Film from India and find that 19 CFR 351.525(b)(6)(iv) is
applicable to both Corticalla/Combattenti and Pagani in regard to their
affiliated milling operations. According to 19 CFR 351.525(b)(6)(iv),
if there is cross-ownership between an input supplier and a downstream
producer, and production of the input product is primarily dedicated to
production of the downstream product, the Department will attribute
subsidies received by the input producer to the combined sales of the
input and downstream products produced by both corporations (excluding
the sales between the two corporations). The issue in question is not
the different types of products the input supplier produces and in what
overall proportions, but whether the input supplier is producing a
product that is primarily dedicated to the production of the subject
merchandise. So, for example, in this instance, the issue at hand is
whether the input (semolina) is being produced primarily for pasta (the
subject merchandise), and not whether the supplier mill's production is
divided between different products (durum and soft wheat).
For all the reasons above, we are preliminarily treating
Corticella, Combattenti, Euricom, and Certosa as a single respondent.
However, Combattenti/Corticella has reported that Euricom and Certosa
did not receive any POR subsidies. Thus, we are attributing any
subsidies received to the combined sales of Corticella and Combattenti.
Pagani: Pagani is a producer of the subject merchandise. Rovato is
an affiliated durum and soft wheat milling operation that sells some of
the semolina that it mills from durum wheat to Pagani for use in its
production of the subject merchandise. Both companies are owned by
Alimco Srl. (``Alimco''), which is a holding company. During the POR,
all three companies shared a common president and board members. Also,
Riccardi Srl. (``Riccardi'') is an affiliated agent through whom Pagani
sold pasta for sales to certain pasta customers.
With regard to Riccardi, although cross-ownership may exist, the
company does not itself meet any of the criteria stipulated in 19 CFR
351.525(b)(6). Moreover, Pagani has reported that Riccardi did not
receive any subsidies; thus, 19 CFR 351.525(c) is not applicable.
Therefore, we are not including subsidies received by Riccardi or
Riccardi's sales in our subsidy calculations.
As for Alimco and Rovato, based on record information and on 19 CFR
351.525(b)(6)(iii) and (iv), respectively (see also above discussion
under ``Attribution of Subsidies'' for Corticella/Combattenti), we are
treating Alimco, Rovato, and Pagani as a single
[[Page 45680]]
respondent. Pagani has reported that neither Alimco nor Rovato received
any subsidy benefits during the POR. Thus, we are attributing any
subsidies received to Pagani's sales only.
Pasta Zara/Pasta Zara 2: Pasta Zara and its affiliate Pasta Zara 2
are both producers of the subject merchandise. As discussed in the July
22, 2004 memorandum to Susan Kuhback entitled ``Pasta Zara S.p.A.--
Attribution Issues'' (which is on file in the Department's CRU), we
have determined that cross-ownership exits with regard to Pasta Zara
and Pasta Zara 2 in accordance with 19 CFR 351.525(b)(6)(vi).
Therefore, we are treating Pasta Zara, Pasta Zara 2, and Pasta Zara's
parent company (whole name is proprietary) as a single entity in
accordance with 19 CFR 351.525(b)(6)(ii) and (iii). Pasta Zara/Pasta
Zara 2 has reported that Pasta Zara's parent company had no POR sales
and received no POR subsidies. Thus, we are attributing any subsidies
received to the combined sales of Pasta Zara and Pasta Zara 2.
Discount Rates and Benchmarks for Loans
Pursuant to 19 CFR 351.524(d)(3)(i)(B), we used the national
average cost of long-term fixed-rate loans as discount rates for
allocating non-recurring benefits over time because none of the
companies for which we need such discount rates took any loans in the
years in which the government agreed to provide the subsidies in
question.
For benchmark rates, in accordance with 19 CFR 351.505(a), we used
the actual cost of comparable borrowing by a company as a loan
benchmark, when available. According to 19 CFR 351.505(a)(2), a
comparable commercial loan is defined as one that, when compared to the
loan being examined, has similarities in the structure of the loan
(e.g., fixed interest rate v. variable interest rate), the maturity of
the loan (e.g., short-term v. long-term), and the currency in which the
loan is denominated. In instances where no applicable company-specific
comparable commercial loans were available, we used a national average
interest rate for comparable commercial loans as allowed under 19 CFR
351.505(a)(3)(ii).
Where we relied on national average interest rates, for years prior
to 1995, we used the Bank of Italy reference rate adjusted upward to
reflect the mark-up an Italian commercial bank would charge a corporate
customer, consisted with past practice in this proceeding. For
subsidies received in 1995 and later, we used the Italian Bankers'
Association interest rate, increased by the average spread charged by
banks on loans to commercial customers plus an amount for bank charges.
Analysis of Programs
I. Programs Preliminarily Determined To Confer Subsidies During the POR
A. Export Marketing Grants Under Law 304/90
Under Law 304/90, the GOI provided grants to promote the sale of
Italian food and agricultural products in foreign markets. The grants
were given for pilot projects aimed at developing links and integrating
marketing efforts between Italian food producers and foreign
distributors. The emphasis was on assisting small- and medium-sized
enterprises (``SMEs'').
Corticella received a grant under this program in 1993 to assist it
in establishing a sales office and network in the United States. No
other respondent covered by this review received benefits under this
program during the POR.
In the Final Affirmative Countervailing Duty Determination: Certain
Pasta from Italy, 61 FR 30288 (June 14, 1996) (``Pasta
Investigation''), the Department determined that these exports
marketing grants confer a countervailable subsidy within the meaning of
section 771(5) of the Act. They are a direct transfer of funds from the
GOI bestowing a benefit in the amount of the grant. Also, these grants
were found to be specific within the meaning of section 771(5A)(B) of
the Act because their receipt was contingent upon exportation. In this
review, neither the GOI nor the responding companies have provided new
information which would warrant reconsideration of our determination
that these grants confer a countervailable subsidy.
Also in Pasta Investigation, the Department treated export
marketing grants as non-recurring. No new information has been placed
on the record of this review that would cause us to depart from this
treatment.
Because the amount of the grant that was approved by the GOI
exceeded 0.5 percent of Corticella's exports to the United States in
the year of approval, we used the grant methodology described in 19 CFR
351.524(d) to allocate the benefit over time. We divided the benefit
attributable to the POR by the value of the companies' total exports to
the United States in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 304/90 export marketing grants to be 0.09 percent
ad valorem for Corticella/Combattenti.
B. Industrial Development Grants Under Law 488/92
In 1986, the European Union (``EU'') initiated an investigation of
the GOI's regional subsidy practices. As a result of this
investigation, the GOI changed the regions eligible for regional
subsidies to include depressed areas in central and northern Italy in
addition to the Mezzogiorno (southern Italy). After this change, the
areas eligible for regional subsidies are the same as those classified
as Objective 1, Objective 2, and Objective 5(b) areas by the EU.\4\ The
new policy was given legislative form in Law 488/92 under which Italian
companies in the eligible sectors (manufacturing, mining, and certain
business services) may apply for industrial development grants. (Loans
are not provided under Law 488/92.)
---------------------------------------------------------------------------
\4\ Objective 1 covers projects located in underdeveloped
regions; Objective 2 addresses areas in industrial decline; and
Objective 5 pertains to agricultural areas.
---------------------------------------------------------------------------
Law 488/92 grants are made only after a preliminary examination by
a bank authorized by the Ministry of Industry. On the basis of this
preliminary examination, the Ministry of Industry ranks the companies
applying for grants. The ranking is based on indicators such as the
amount of capital the company will contribute from its own funds, the
number of jobs created, regional priorities, etc. Grants are then made
based on this ranking.
Russo/Di Nola is the only respondent in this proceeding that
reported receiving grants under Law 488/92 which could potentially
confer a benefit during the POR. Specifically, Russo's predecessor
company, Cicciano, received three separate grants through this program.
For the two grants approved in 1996, Cicciano received all of the
payments under these grants prior to the change in ownership. For the
one grant approved in 1997, most of the payments to Cicciano were made
prior to Cicciano's purchase by Di Nola; however, part of the payment
was made subsequent to the change in ownership in December 2001.
In past reviews in this proceeding, we found grants made through
this program to be countervailable. See, e.g., Certain Pasta from
Italy: Final Results of the Second Countervailing Duty Administrative
Review, 64 FR 44489, 44490-91 (August 16, 1999) (``Pasta Second
Review''). Pursuant to section 771(5) of the Act, the grants are a
direct transfer of funds from the GOI bestowing a benefit in the amount
of the
[[Page 45681]]
grant. Also, these grants were found to be regionally specific within
the meaning of section 771(5A)(D)(iv) of the Act. In this review,
neither the GOI nor the responding companies have provided new
information which would warrant reconsideration of our determination
that these grants are countervailable subsidies.
With regard to the benefits under this program received prior to
Cicciano's change in ownership, as discussed above in the ``Changes In
Ownership'' section, we preliminarily find that any pre-sale subsidies
received by Cicciano are non-countervailable during the POR.
As for the benefits provided subsequent to the change in ownership,
in the Pasta Second Review, the Department treated industrial
development grants under Law 488/92 as non-recurring. No new
information has been placed on the record of this review that would
cause us to depart from this treatment.
Because the amount of the grant that was approved by the GOI
exceeded 0.5 percent of the reported total sales in the year of
approval, we used the grant methodology described in 19 CFR 351.524(d)
to allocate the post-change-in-ownership benefit over time. We divided
the benefit attributable to the POR by the value of Russo/Di Nola's
total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 488/92 industrial development grants to be 0.04
percent ad valorem for Russo/Di Nola.
C. Industrial Development Loans Under Law 64/86
In addition to the Law 64/86 industrial development grants
discussed below, Law 64/86 also provided reduced rate industrial
development loans with interest contributions paid by the GOI on loans
taken by companies constructing new plants or expanding or modernizing
existing plants in the Mezzogiorno. As discussed below in the
``Industrial Development Grants Under Law 64/86'' section, pasta
companies were eligible for interest contributions to expand existing
plants, but not to establish new plants. The fixed interest rates on
these long-term loans were set at the reference rate with the GOI's
interest contributions serving to reduce this rate. Although Law 64/86
was abrogated in 1992 (effective 1993), projects approved prior to 1993
were authorized to receive interest subsidies after 1993.
Russo's predecessor, Cicciano, had a Law 64/86 industrial
development loan outstanding during the POR. No other respondent in
this proceeding had Law 64/86 loans outstanding during the POR.
In the Pasta Investigation, the Department determined that Law 64/
86 loans confer a countervailable subsidy within the meaning of section
771(5) of the Act. They are a direct transfer of funds from the GOI
providing a benefit in the amount of the difference between the
benchmark interest rate and the interest rate paid by the companies
after accounting for the GOI's interest contributions. Also, these
loans were found to be regionally specific within the meaning of
section 771(5A)(D)(iv) of the Act. In this review, neither the GOI nor
the responding companies have provided new information which would
warrant reconsideration of our determination that these loans confer a
countervailable subsidy.
In accordance with 19 CFR 351.505(c)(2), we calculated the benefit
for the POR by computing the difference between the Payments Russo made
on its Law 64/86 loan during the POR and the payments Russo would have
made on the benchmark loan. We divided the benefit received by Russo by
Russo/Di Nola's total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 64/86 industrial development loans to be 0.03
percent ad valorem for Russo/Di Nola.
D. European Regional Development Fund Grants
The ERDF is one of the EC's Structural Funds. It was created
pursuant to the authority in Article 130 of the Treaty of Rome to
reduce regional disparities in socio-economic performance within the
EC. The ERDF program provides grants to companies located within
regions which meet the criteria of Objective 1 (underdeveloped
regions), Objective 2 (declining industrial regions), or Objective 5(b)
(declining agricultural regions) under the Structural Funds.
Russo/Cicciano is the only respondent in this proceeding that
reported receiving grants under the ERDF which could potentially confer
a benefit during the POR. Specifically, Russo's predecessor company,
Cicciano, was approved for an ERDF grant in 1999. Most of the payments
to Cicciano as part of this grant were made prior to Cicciano's
purchase by Di Nola; however, some payments were received subsequent to
the change in ownership in December 2001.
In the Pasta Investigation, the Department determined that ERDF
grants confer a countervailable subsidy within the meaning of section
771(5) of the Act. They are a direct transfer of funds bestowing a
benefit in the amount of the grant. Also, these grants were found to be
regionally specific within the meaning of section 771(5A)(D)(iv) of the
Act. In this review, neither the EU, the GOI, nor the responding
companies have provided new information which would warrant
reconsideration of our determination that ERDF grants are
countervailable subsidies.
With regard to the benefits under this program received prior to
Cicciano's change in ownership, as discussed above in the ``Changes In
Ownership'' section, we preliminarily find that any pre-sale subsidies
received by Cicciano are non-countervailable during the POR.
As for the benefits provided subsequent to the change in ownership,
in the Pasta Investigation, the Department treated ERDF grants as non-
recurring. No new information has been placed on the record of this
review that would cause us to depart from this treatment.
Because the amount of the grant that was approved exceeded 0.5
percent of the reported total sales in the year of approval, we used
the grant methodology described in 19 CFR 351.524(d) to allocate the
post-change-in-ownership benefit over time. We divided the benefit
attributable to the POR by the value of Russo/Di Nola's total sales in
the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the ERDF grant to be 0.01 percent ad valorem for Russo/Di
Nola.
tE. Law 236/93 Training Grants
Under Law 236/93, which is administered by the regional governments
but funded by the GOI, grants are provided to Italian companies for
worker training.
Pagani received a grant under this program during the POR. Its
grant application was approved in 1999, and tranches of the grant were
disbursed in 2000, 2001, and 2002.
In Certain Pasta from Italy: Final Results of the Third
Countervailing Duty Administrative Review, 66 FR 11269 (February 23,
2001) (``Pasta Third Review''), the Department determined that Law 236/
93 training grants confer a countervailable subsidy within the meaning
of section 771(5) of the Act. They are a direct transfer of funds from
the GOI bestowing a benefit in the amount of the grant. Also, because
the GOI and the regional government of Abruzzo did not provide adequate
information about the distribution of grants under this program, we
determined that Law 236/93 training grants were specific within the
meaning of section 771(5A) of the Act. In this
[[Page 45682]]
review, neither the GOI nor any other party has provided sufficient
information that would warrant reconsideration of or change our past
determination that these grants are countervailable subsidies.
Consistent with 19 CFR 351.524(c)(1) and our treatment of this
grant in the Pasta Third Review, the Department is treating this worker
training subsidy as a recurring benefit. Therefore, to calculate the
countervailable subsidy, we divided the amount received by Pagani in
the POR by the companies' total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy for this program to be 0.06 percent ad valorem for Pagani.
F. Law 1329/65 Interest Contributions (Sabatini Law) (Formerly Lump-Sum
Interest Payment Under the Sabatini Law for Companies in Southern
Italy)
The Sabatini Law was enacted in 1965 to encourage the purchase of
machine tools and production machinery. It provides, inter alia, for
one-time, lump-sum interest contributions from the Mediocredito
Centrale toward interest owed on loans taken out to purchase these
types of equipment.
Paasta Zara, Pagani, and Russo/Di Nola reported they received
interest contributions under the Sabatini Law.
With respect to Pasta Zara and Pagani, in the Pasta Investigation,
the Department concluded that the benefits provided in northern Italy
under this program were not specific and, therefore, not
countervailable. No party in this proceeding has challenged this past
finding. Thus, we preliminarily find that any benefits provided to
Pagani and Pasta Zara are not countervailable because these companies
are located in northern Italy.
As for Russo/Di Nola, because the concessionary rate for companies
is southern Italy was lower than the interest rate available to users
of the program in northern Italy, the Department in the Pasta
Investigation determined that the Sabatini Law interest contributions
to companies in southern Italy were countervailable subsidies within
the meaning of section 771(5) of the Act. They were a direct transfer
of funds from the GOI providing a benefit in the amount of the
difference between the benchmark interest rate and the interest rate
paid by the companies. In addition, they were regionally specific
within the meaning of section 771(5A)(D)(iv) of the Act. In this
review, neither the GOI nor the responding companies have provided new
information which would warrant reconsideration of our determination
that benefits provided under this program in southern Italy confer a
countervailable subsidy.
The Department also determined in the Pasta Investigation and in
subsequent reviews of this order that companies were able to anticipate
the interest contributions at the time the loans were taken out.
Consequently, in accordance with 19 CFR 351.508(c)(2) and 19 CFR
351.505(c)(2), any benefit would be countervailed in the year of
receipt. See also Certain Pasta from Italy: Preliminary Results and
Partial Rescission of Countervailing Duty Administrative Review, 66 FR
40987 (August 6, 2001) (unchanged in Certain Pasta from Italy: Final
Results of the Fourth Countervailing Duty Administrative Review, 66 FR
64214 (December 12, 2001) and Certain Pasta from Italy: Amended Final
Results of the Fourth Countervailing Duty Administrative Review, 67 FR
59 (January 2, 2002)). No new information has been placed on the record
of this review that would cause us to depart from this practice.
In the instant proceeding Russo/Di Nola reported that Di Nola
received interest contributions under this program during the POR. To
calculate the countervailable subsidy for these interest contributions
that were received during the POR, we divided the amount received by
Russo/Di Nola in the POR by Russo/Di Nola's total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy for this program to be 0.08 percent ad valorem for Russo/Di
Nola.
tG. Development Grants Under Law 30 of 1984
Law 30 of 1984 was enacted by the Regional Government of Friuli-
Venezia Giulia to provide one-time development grants to companies for
investments in industrial projects, including the construction of new
plants and modernization or expansion of existing plants. Eligible
companies can receive a grant amounting to 20 percent of the cost of
the investment, with the grant not to exceed 1,000,000,000 lire. Only
companies located in certain parts of the Friuli-Venezia Giulia region
are eligible to receive benefits under this program in accordance with
article 87, paragraph 3, letter c of the EC Treaty.
Pasta Zara 2 received a grant under this program during the POR for
consultancy costs for company start-up and preparation of contracts
relative to the purchase of plant equipment. No other respondent in
this proceeding reported receiving POR benefits under this program.
In the Final Affirmative Countervailing Duty Determination: Certain
Cut-to-Length Carbon-Quality Steel Plate from Italy, 64 FR 73244, 73255
(December 29, 1999) (``CTL Plate from Italy''), the Department
determined that these grants confer a countervailable subsidy within
the meaning of section 771(5) of the Act. Specifically, they are a
financial contribution as defined in section 771(5)(D)(i) of the Act in
the form of a direct transfer of funds from the GOI bestowing a benefit
in the amount of the grant. Also, these grants were found to be
specific within the meaning of section 771(5A)(D)(iv) of the act
because eligibility for the grants was limited to certain geographical
areas within the Friuli-Venezia Giulia region. In this review, neither
the GOI nor the responding companies have provided new information
which would warrant reconsideration of our determination that these
grants confer a countervailable subsidy.
Also in CTL Plate from Italy, the Department treated grants under
this program as non-recurring. No new information has been placed on
the record of this review that would cause us to depart from this
treatment.
Pursuant to 19 CFR 351.524(b)(2), the Department will normally
expense non-recurring benefits provided under a particular subsidy
program to the year in which benefits are received if the total amount
approved under the program is less than 0.5 percent of relevant sales
during the year in which the subsidy was approved. Because the amount
of the development grant approved by the GOI for Pasta Zara 2 under
this program was less than 0.5 percent of Pasta Zara 2's sales in the
year in which the grant was approved, we allocated the entire amount of
the grant to the POR (the year in which the grant was received) in
accordance with 19 CFR 351.524(b)(2). We divided the full amount of the
grant by the value of the companies' total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 30/84 development grants to be 0.02 percent ad
valorem for Pasta Zara/Pasta Zara 2.
tH. Social Security Reductions and Exemptions--Sgravi
Italian law allows companies, particularly those located in the
Mezzogiorno, to use a variety of exemptions and reductions (``sgravi'')
of the payroll contributions that employers make to the Italian social
security system for health care benefits, pensions, etc. The sgravi
benefits are regulated by a complex set of laws and
[[Page 45683]]
regulations, and are sometimes linked to conditions such as creating
more jobs. We have found in past proceedings that the benefits under
some of these laws (e.g., Laws 183/76 and 449/97) are available only to
companies located in the Mezzogiorno and other disadvantaged regions.
Other laws (e.g., Laws 407/90 and 863/84) provide benefits to companies
all over Italy, but the level of benefits is higher for companies in
the south than for companies in other parts of the country.
The various laws identified as having provided sgravi benefits
during the POR are the following: Law 407/90 (Pagani, Lensi, and
Corticella), Law 223/91 (Combattenti, Pagani, Lensi, and Pasta Zara/
Pasta Zara 2), Law 337/90 (Corticella), Law 56/87 (Pasta Zara), and Law
25/55 (Pasta Zara).
In the Pasta Investigation and subsequent reviews, the Department
determined that the various forms of social security reductions and
exemptions confer countervailable subsidies within the meaning of
section 771(5) of the Act. They represent revenue foregone by the GOI
bestowing a benefit in the amount of the savings received by the
companies. Also, they were found to be regionally specific within the
meaning of section 771(5A)(D)(iv) of the Act because they were limited
to companies in the Mezzogiorno or because the higher levels of
benefits were limited to companies in the Mezzogiorno.
In the instant review, no party in this proceeding challenged our
past determinations that sgravi benefits were not countervailable for
companies located outside of the Mezzogiorno. Therefore, because
Pagani, Lensi, and Pasta Zara/Pasta Zara 2 are not located in the
Mezzogiorno, we preliminarily find that these three companies did not
receive any countervailable subsidies under this program during the
POR.
Additionally, neither the GOI nor the responding companies
challenged our past determinations that most sgravi benefits for
companies in southern Italy confer a countervailable subsidy. However,
Corticella/Combattenti, which is located in the Mezzogiorno, has
claimed that benefits under the three sgravi laws through which it
received benefits during the POR (Law 407/90, Law 223/91, and Law 337/
90) are not specific. Specifically, Corticella/Combattenti claim that
benefits under these three laws are not countervailable because they
are generally available throughout Italy.
Based on a review of record evidence in the instant proceeding, we
preliminarily find, consistent with our past determinations, that
benefits under these three laws are specific within the meaning of
section 771(5A) of the Act and, thus, confer countervailable subsidies.
Contrary to Corticella/Combattenti's claims, no party in this
proceeding has provided sufficient information with regard to laws 407/
90 and 223/91 which would warrant reconsideration of our past
determinations that these laws are regionally specific within the
meaning of section 771(5A)(D)(iv) of the Act. As for law 337/90, record
information also shows that this law is regionally specific within the
meaning of section 771(5A)(D)(iv) of the Act because the higher levels
of benefits were limited to companies in the Mezzogiorno and to
handicraft enterprises.
In accordance with 19 CFR 351.524(c) and consistent with our
methodology in the Pasta Investigation and in subsequent reviews of
this order, we have treated social security reductions and exemptions
as recurring benefits. To calculate the countervailable subsidy, we
divided Corticella/Combattenti's savings in social security
contributions during the POR by the companies' total sales in the POR.
On this basis, we preliminarily determine the countevailable
subsidy from the sgravi program to be 0.01 percent ad valorem for
Corticella/Combattenti.
I. Law 908/55
The GOI created the Fondo di Rotzaione Iniziative Economiche
(Rotational Fund for Economic Initiatives) (``FRIE'') through Law 908
of October 18, 1955 in order to promote economic initiatives within the
territory of Trieste and the province of Gorizia in the Friuli-Venezia
Giulia region. The fund provides reduced-interest loans for the
construction, re-activation, transformation, modernization,
improvement, and industrial development of industrial plants and
handicraft companies in the above-noted areas. Companies who receive
long-term, variable rate loans under this program receive an interest
rate equal to 50 percent of the 6-month Euro Interbank Offered Rate.
Pasta Zara 2 was the only respondent in this proceeding who
reported having outstanding Law 908/55 loans during the POR.
Specifically, Pasta Zara 2 had two long-term, variable rate FRIE loans
that were outstanding during the POR whose loan terms were established
in 1999 and 2001.
We preliminarily find that these loans are a direct transfer of
funds from the GOI within the meaning of section 771(5)(D)(i) of the
Act. Also, the loans are regionally specific within the meaning of
section 771(5A)(D)(iv) of the Act. Finally, we preliminarily determine
that a benefit exists pursuant to section 771(5)(E)(ii) of the Act.
According to 19 CFR 351.505(a)(5), in order to determine whether long-
term variable interest rate loans confer a benefit, the Department
first compares the benchmark interest rate to the rate on the
government-provided loan for the year in which the government loan
terms were established. According to 19 CFR 351.505(a)(5)(i), if the
comparison shows that the origination-year interest rate on the
government-provided loan was lower than the for the origination-year
interest rate on the benchmark loan, the Department will examine that
loan in the POR to measure the benefit. Based on a comparison of the
origination year interests rates of the 908/55 loans and the benchmark
loans, we found that the government loan rates were lower than the
benchmark rates in both instances. Thus, we preliminarily find that a
benefit was conferred through these loans within the meaning of section
771(5)(E)(ii) of the Act as described in 19 CFR 351.505(a)(5) and that
these loans constitute coutervailable subsidies pursuant to section
771(5) of the Act.
In accordance with 19 CFR 351.505(c)(4), we calculated the benefit
for the POR by computing the difference between the payments Pasta Zara
2 made on their Law 908/55 loans during the POR and the payments Pasta
Zara 2 would have made on the benchmark loan. We then divided the
benefit received by the companies' total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 908/55 loans to be 2.74 percent ad valorem for
Pasta Zara/Pasta Zara 2.
II. Program Preliminarily Determined To Be Not Countervailable
tEuropean Economic Commission (``ECC'') Decision 94/217
Under EEC Decision 94/217, SMEs could receive onetime interest
contributions on European Investment Bank (``EIB'') loans for
investments that led to the creation of new jobs. The program was
intended to provide assistance to SMEs in the EC by lowering the
interest rates on EIB loans for these companies. The loans under this
program were limited to ECU 30,000 times the number of jobs created,
and interest contribution payments were in total limited to ten percent
of the size of the loan (equal to two percent per year on the five-year
loans that were required under this program). In order
[[Page 45684]]
to receive the interest contributions, companies were required to
submit a certification relating to the creation of jobs, and the
financial institutions acting as intermediaries were required to
certify that the loans had been made and were in repayment. Once these
certifications were received, the EIB agent institution would forward
the EIB interest contribution to the beneficiary via its financial
intermediary. The application deadline for applying for benefits under
this program was December 15, 1995, and all payments under this program
were finalized by the end of 1997.
Pasta Zara is the only respondent in this proceeding that reported
receiving interest contributions under EEC Decision 94/217.
According to record information, any SME in the EC was eligible to
apply for loans under these programs and to receive the associated
interest contributions. The interest contributions were not export
subsidies or import substitution subsidies according to sections
771(5A)(A) and (B) of the Act. Nor were the interest contributions
specific according to the criteria stipulated in sections
771(5A)(D)(i), (ii), or (iv) of the Act. Finally, according to record
information, thousands of SMEs within the EC received benefits under
this program in many different industries. According to data on the
sectoral distribution of benefits under this program, the metal working
and mechanical engineering industries (20.6 percent) and the private
and public sector services industries (11.3 percent) received the most
benefits under this program, with the foodstuffs industry (which would
include the pasta industry) ranked third with 8.9 percent of the
benefits and the rubber and plastic processing industry ranked fourth
with 6.6 percent of the benefits. Based on this information, we
preliminary find that the pasta industry was not a predominant user of
this program and did not receive a disproportionately large amount of
the benefits under this program. Thus, the program is not de facto
specific according to section 771(5A)(D)(iii) of the Act. Based on the
above analysis, we find that this program is not specific as defined in
section 771(5A) of the Act, and thus, not countervailable.
111. Programs Preliminarily Determined to Not Confer Subsidies During
the POR
tA. Industrial Development Grants Under Law 64/86
Law 64/86 provided assistance to promote development in the
Mezzogiorno. Grants were awarded to companies constructing new plants
or expanding or modernizing existing plants. Pasta companies were
eligible for grants to expand existing plants but not to establish new
plants because the market for pasta was deemed to be close to
saturated. Grants were made only after a private credit institution,
chosen by the applicant, made a positive assessment of the project. (As
noted above, loans were also provided under Law 64/86.) In 1992, the
Italian Parliament abrogated Law 64/86 and replaced it with Law 488/92
(see above). This decision became effective in 1993. However, companies
whose projects had been approved prior to 1993 were authorized to
continue receiving grants under Law 64/86 after 1993.
Russo/Di Nola is the only respondent in this proceeding that
reported receiving grants under Law 64/86 which could potentially
confer a benefit during the POR. Specifically, Cicciano received a
grant under this program in 1998 for the general modernization and
technical reorganization of the Cicciano plant used in the production
of cookies, pasta, and flour.
In past reviews in this proceeding, we found grants made through
this program to be countervailable. See, e.g., Pasta Investigation.
However, the grant under this program was received by Cicciano prior to
its purchase by Di Nola in December 2001. Thus, as discussed above in
the ``Changes In Ownership'' section, we preliminarily find that any
pre-sale subsidies received by Cicciano as part of this program are
extinguished in their entirety and, therefore, provide no
countervailable benefit to Russo/Di Nola during the POR.
tB. Brescia Chamber of Commerce Training Grants
The Chamber of Commerce of Brescia provided training grants during
2002 and 2003 to companies in the province of Brescia for the
professional training of entrepreneurs, directors, and employees. The
goal of these grants was to improve economic, social, and productive
development in the province.
Lensi was the only respondent in this proceeding that reported
receiving grants under this program during the POR.
In situations where any benefit to the subject merchandise would be
so small that there would be no impact on the overall subsidy rate,
regardless of a determination of countervailability, it may not be
necessary to determine whether benefits conferred under these programs
to the subject merchandise are ocuntervailable. (See, e.g. Live Cattle
From Canada; Final Negative Countervailing Duty Determination, 64 FR
57040, 57055 (October 22, 1999) (``Cattle from Canada'').) In this
instance, any benefit to the subject merchandise resulting from this
grant would be so small that there would be no impact on the overall
subsidy rate, regardless of a determination of countervailability.
Thus, consistent with our past practice, we do not consider it
necessary to determine whether benefits conferred thereunder to the
subject merchandise are countervailable.
tC. Law 317/91 Benefits for Innovative Investments
Law 317/91 allows for a capital contribution or a tax credit up to
a maximum amount of Euro 232,405.60 to small and medium-sized
industrial, commercial, and service companies for innovative
investments. Pasta Zara has stated that it received tax benefits under
this law in 1994 but that no benefits were received in the POR. No
other respondent reporting receiving POR benefits from this program.
Pursuant to 19 CFR 351.524(c)(1), the Department normally considers
tax programs to provide recurring benefits. Because neither Pasta Zara
nor its affiliates received tax benefits under Law 317/91 during the
POR, we preliminarily determine that this program did not confer a
countervailable subsidy in the POR.
D. Tremonti Law 489/94 (Formerly Law Decree 357/94)
Tremonti Law 489/94 allowed for a deduction from taxable income of
50 percent of the difference between investments in new plant and
equipment compared to the average investment rate for the preceding
five years. Pasta Zara has stated that one of its affiliates received
tax benefits under this law in 1995 but that no benefits were received
in the POR. No other respondent reporting receiving POR benefits from
this program.
Pursuant to 19 CFR 351.524(c)(1), the Department normally considers
tax programs to provide recurring benefits. Because neither Pasta Zara
nor its affiliates received tax benefits under Law 489/94 during the
POR, we preliminarily determine that this program did not confer a
countervailable subsidy in the POR.
E. Ministerial Decree 87/02
Ministerial Decree Number 87 (February 25, 2002), in accordance
with Law 193 of June 22, 2000, allows companies that hire or have
training programs for prisoners to benefit from a monthly tax credit
amounting to 516.46 Euros for every prisoner recruited. Pasta
[[Page 45685]]
Zara was the only respondent in this proceeding that reported receiving
tax credits under this program during the POR.
In situations where any benefit to the subject merchandise would be
so small that there would be no impact on the overall subsidy rate,
regardless of a determination of countervailability, it may not be
necessary to determine whether benefits conferred under these programs
to the subject merchandise are countervailable. (See, e.g., Cattle from
Canada.) In this instance, any benefit to the subject merchandise
resulting from this grant would be so small that there would be no
impact on the overall subsidy rate, regardless of a determination of
countervailability. Thus, consistent with our past practice, we do not
consider it necessary to determine whether benefits conferred
thereunder to the subject merchandise are countervailable.
Law 10/91 Grants to Fund Energy Conservation
Under Law 10/91, the GOI provides funds for the development of
energy-conserving technology. Law 10/91 authorized grants based on
applications submitted in 1991 and 1992. Pasta Zara was the only
respondent that reported receiving benefits under this program.
Specifically, Pasta Zara reported that it received a grant through this
program in 1993 in order to purchase new boilers for its facility.
Pursuant to 19 CFR 351.524(b)(2), the Department will normally
expense non-recurring benefits provided under a particular subsidy
program to the year in which benefits are received if the total amount
approved under the program is less than 0.5 percent of relevant sales
during the year in which the subsidy was approved. Because the amount
of the energy savings grant approved by the GOI for Pasta Zara under
this program was less than 0.5 percent of Pasta Zara's sales in the
year in which the grant was approved, this grant would be expensed
prior to the POR in accordance with 19 CFR 351.524(b)(2). Thus, no
countervailable benefit was provided to Pasta Zara/Pasta Zara 2 during
the POR under this program.
IV. Programs Preliminarily Determine Not To Have Been Used During the
POR
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise under review
did not apply for or receive benefits under these programs. during the
POR:
A. Law 341/95 Interest Contributions on Debt Consolidation Loans
(Formerly Debt Consolidation Law 341/95)
B. Regional Tax Exemptions Under IRAP
C. Corporate Income Tax (IRPEG) Exemptions
D. Export Restitution Payments
F. Export Credits Under Law 227/77
G. Capital Grants Under Law 675/77
H. Retraining Grants Under Law 675/77
I. Interest Contributions on Bank Loans Under Law 675/77
J. Interest Grants Financed by IRI Bonds
K. Preferential Financing for Export Promotion Under Law 394/81
L. Urban Redevelopment Under Law 181
M. Grant Received Pursuant to the Community Initiative Concerning
the Preparation of Enterprises for the Single Market (PRISMA)
N. Industrial Development Grants under Law 183/76
O. Interest Subsidiaries Under Law 598/94
P. Duty-Free Import Rights
Q. Remission of Taxes on Export Credit Insurance Under Article 33
of Law 227/77
R. European Social Fund Grants
S. Law 113/86 Training Grants
T. European Agricultural Guidance and Guarantee Fund
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for each producer/exporter covered by this
administrative review. For the period January 1, 2002 through December
31, 2002, we preliminarily determine the net subsidy rates for
producers/exporters under review to be those specified in the chart
shown below.
------------------------------------------------------------------------
Producer/exporter Net subsidy rate
------------------------------------------------------------------------
Pastificio Fratelli Pagani S.p.A.......... 0.06 percent (de minimis)
Pastificio Corticella S.p.A./Pastificio 0.10 percent (de minimis)
Combattenti S.p.A.
Pasta Zara S.p.A./Pasta Zara 2 S.p.A/ 2.76 percent
Societa per Azioni Pasta Giulia S.p.A.
Pasta Lensi S.r.l......................... 0.00 percent (de minimis)
Pastificio Carmine Russo S.p.A./Pastificio 0.16 percent (de minimis)
Di Nola S.p.A.
------------------------------------------------------------------------
The calculations will be disclosed to the interested parties in
accordance with 19 CFR 351.224(b).
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct Customs to
assess countervailing duties at these net subsidy rates. The Department
will issue appropriate instructions directly to Customs within 15 days
of publication of the final results of this review. The Department also
intends to instruct Customs to collect cash deposits of estimated
countervailing duties at these rates on the f.o.b. value of all
shipments of the subject merchandise from the producers/exporters under
review that are entered, or withdrawn from warehouse, for consumption
on or after the date of publication of the final results of this
administrative review.
For all other companies that were not reviewed (except Barilla G. e
R.F.lli S.p.A. and Gruppo Agricoltura Sana S.r.L., which are excluded
from the order), the Department has directed Customs to assess
countervailing duties on all entries between January 1, 2002 and
December 31, 2002 at the rates in effect at the time of entry.
For all non-reviewed firms, we will instruct Customs to collect
cash deposits of estimated countervailing duties at the most recent
company-specific or all others rate applicable to the company. These
rates shall apply to all non-reviewed companies until a review of a
company assigned these rates is requested.
Public Comment
Interested parties may submit written arguments in case briefs
within 30 days of the date of publication of this notice. Rebuttal
briefs, limited to issues raised in case briefs, may be filed not later
than five days after the date of filing the case briefs. Parties who
submit briefs in this proceeding should provide a summary of the
arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with 19 CFR
351.303(f).
Interested parties may request a hearing within 30 days after the
date of publication of this notice. Any hearing, if requested, will be
held two days after the scheduled date for submission of rebuttal
briefs.
The Department will publish a notice of the final results of this
administrative review within 120 days from the publication of these
preliminary results.
We are issuing and publishing these results in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
[[Page 45686]]
Dated: July 26, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-17419 Filed 7-29-04; 8:45 am]